Texas Roadhouse is buying 13 restaurants from one of its largest U.S. franchisees as it continues its efforts to operate more of its own stores.
Seven of the stores are in Indiana and Ohio and six are in California. The deal is expected to close early next year.
It comes as the Louisville, Kentucky-based casual-dining steak chain continues to defy the industry trend of sluggish sales and traffic. In the third quarter, same-store sales rose 8.5% year over year at corporate stores and 7.2% at franchised locations. It has now posted same-store sales growth of 8% or more in seven straight quarters.
The chain’s corporate locations typically do better than its franchised ones, which is one reason Texas Roadhouse may want to own more of them. Executives said they expect the acquisition to boost its average weekly sales by about 0.5%.
For franchisees, the chain’s recent success also makes it an attractive time to sell.
The chain has been scooping up franchised locations for several years. It bought eight in 2022 for $33.1 million and another eight in 2023 for $39 million. The company didn’t say how much it will pay for the latest group of restaurants.
At the end of last quarter, Texas Roadhouse operated 601 domestic locations, compared to just 56 that were franchised. It had another 56 franchised locations in international markets.
The news followed another impressive quarter for the chain. Traffic rose 3.8% during the three months ended Sept. 24, and customers ordered more sides and nonalcoholic beverages, pushing up check averages by 4.7%.
Not only that, but traffic accelerated through the quarter, up more than 4% in September and more than 5% so far in October.
For years now, the chain has managed to win over fickle consumers with good service and food at attractive prices, despite the fact that it does not discount, deliver or advertise on TV.
“I think it's just a continuation of our operators doing what they always do and making sure that we are providing a legendary experience and being well staffed and priced accordingly and delivering on our promise and that consistency that we've always delivered to them,” said Michael Bailen, senior director of investor relations, during an earnings call Thursday.
That growth has helped the chain’s bottom line. In the third quarter, restaurant-level margins grew to 16%, up from 14.6% a year ago.
The chain has also enjoyed lower-than-expected food inflation thanks to softer beef costs. On Thursday, it lowered its estimated commodity inflation for the year to less than 1%.
In September, the chain raised menu prices 0.9%, bringing total pricing to 3.1% for the current quarter. Executives said they don’t expect the hike to impact the chain’s value perception, traffic or mix.
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